Out on the beaches of some remote island sippin’ on some sizzurp brought to you by a lackey that barely talks English. The sun warms your half naked body as your look to your left and smile at your lovely husband/wife. And at that moment that you realize that it isn’t the sun that’s keeping you warm but the fuzzy happiness radiating from deep down inside you. The nice calm ocean waves sounds sooth you into a half meditative, half asleep state and you feel confident that you will blissfully enjoy the rest of your days on this earth.

You think that is retirement? Ha. Get real. The picture painted above misses one key fundamental element…you’re old. You can’t relax on the beach because your back hurts. As soon as you find a position that relives the pain, you urgently need to take a piss. You return only to find your significant other has fallen and can’t get up. You cry for help since you are too weak to do much of anything after your arthritis. You have to piss again. Finally you return home from your vacation to find out that one of your good friends has died. You forget about 15 minutes later due the early stages of Alzheimer’s that you are soon to be diagnosed with.  Usually your significant other has helped you remember things but he/she is falling prey to dementia and continues to constantly fall and can’t figure out how to get up.

This is what I don’t get about retirement. People trying to save up too much cash (in other words, not enjoying it now) for what has to be the worst period of life. You just sit around, get weaker and have the ability to do less and less. Remember what it was like to be a kid and you couldn’t do grown up stuff? Remember how horrible that was not being able to do whatever you wanted? In retirement, you end up being a grown up that can’t do grown up stuff. You can’t eat whatever you want. You can’t work. You can’t have sex properly. You can’t play sports. You can’t get around easily and quickly like you used to. You can’t keep up with the times as technology zooms past you. In layman’s terms; you can’t do shit bro. You can’t even take a shit properly for heaven’s sakes. So why save up so much for it? I’m not against saving money in general here. I’m just against saving so much into your retirement accounts that make it incredibly difficult for you to withdrawal before the precipice of death. I’m against having so much blindly invested in stocks and bonds in retirement accounts when in fact there are better opportunities around you.

I also don’t like the typical retirement advice because it ignores one glaring probability; the fact that you might literally die tomorrow. It’s tough to face, but imagine the extreme case where an individual lives uncomfortably his whole life and saves a ton money but takes a death right before retiring. Retirement accounts should be used to save up for the essential costs during your retirement years. I’ll take myself as an example. I’m assuming that I have a house fully paid off at this point. I figure that at a bare minimum during retirement I’ll need about:

• $300 for food
• $300 for medical
• $300 for other miscellaneous expenses (insurance, repairs, speeding tickets, etc)
• $100 for miscellaneous entertainment expenses (entertainment isn’t an essential but I may need it to keep my sanity).

This brings my monthly expenses to $1000/mo (which is $3240 after adjusting for inflation for 30 years). I’m assuming that I will:

• Consistently save for retirement for 30 years
• Achieve a 8% return the first year of saving for retirement and 0.1% less each subsequent year as I move money into safer investments. 8% the first year, 7.9% the second, 7.8% the third, etc…
• Live for 30 years in retirement
• Achieve a rate of return equivalent to inflation during retirement

After some basic calculations it looks like I’ll need $1.3M to have all my essential expenses (adjusted for inflation) covered during retirement which using the assumptions above means I should save $1250 a month. What I’m suggesting here is that after you figure this out for yourself, is commit to saving this much and no more. Max out your Roth and put the rest in a 401k. Take the money immediately out of your paycheck and throw it into these retirement accounts so that you never even see it. I’m not even considering or relying on social security or any other savings as this is simply my ultimate backup money for retirement.

Since that’s been taken care of I can comfortably focus on other things now. No need to be spendthrift, but I definitely don’t need to be stingy either. No need to waste time clipping coupons and instead can work on looking for opportunities and major deals. Since a large chunk of my money isn’t tied up in retirement accounts and I have a backup plan setup, I have liquidity to go after opportunities that may arise. Cash is king in times of distress. Opportunities like investing in a friend’s business idea, buying stocks at depressed prices after the financial crisis of 2008, starting my own company with my bold ideas, making an offer on the neighbors’ foreclosed house, upgrading my furniture with going out of business sales, etc… These opportunities are far better and offer much greater returns that outweigh the one dimensional simplistic tax benefits of retirement accounts that aren’t liquid at all whatsoever.

Look, I know I’m oversimplifying things here, but lock up a significant portion of your assets in retirement accounts and you’ll miss out on a lot of great opportunities around you.